We do lots of work with clients on managing their PPF levy looking to ensure they are aware of the issues and have taken steps to minimise the levy payable. Clearly a major component of the levy calculation is the Dun & Bradstreet failure score rating and we’re forever banging on about making sure that all the information held by D&B is up to date and accurate, otherwise it could be costing a business a lot of money unnecessarily.
The whole issue was brought home to me only this week when I reviewed the information held on our business. Now we don’t have to worry about the PPF levy, having taken our own advice and implemented a DC and not a DB pension scheme for our staff, but the exercise did highlight some worrying inaccuracies in the data held. The calculation of the failure score is shrouded in mystery given it is deemed by D&B to be commercially sensitive information. However we do know that it is not just based upon a business financials but these are only one factor considered along with; business demographics such as sector, term in business, Mortgages, CCJ’s etc; the individuals controlling the business; and their previous experience and trade information such as payment habits. So not having up to date records of directorships, asset values, bank details and payment habits, despite these being publically available, could all have an impact on the failure score, as could not having updated financial information. Should the Pension Regulator and PPF be taking some steps to verify the accuracy of the information held or at least implement an appeals process which allowed for review should the rating prove inaccurate as a result of the records held? In fairness D&B has a verification process. Sort of. There was considerable hilarity (or was it hysterical despair) at a recent client meeting we were involved with. The trustees and employer were negotiating on scheme funding and we had provided a D&B comprehensive report for the trustees to provide a high level view of the employer covenant. The employer was a large UK subsidiary of an even larger multi-national company. The hilarity was a direct result of what appears to be D&B’s verification process. Under the section headed “Management Comments” D&B had noted:- “During our investigation: • Miss Doris Smith*, Receptionist, confirmed general details in this report” *Name changed to protect the guilty! Now I am second to no-one in my admiration of Receptionists, and am fully aware that many companies, including my own, would grind to a halt if the directors were left to run things on their own for a few days. However, I would question whether Doris, as we shall continue to refer to her, is quite the right person to be contacted in these circumstances. D&B might argue that they are only checking general details, such as phone numbers, but if that’s the case why bother? A phone number gives no added insight into a Company’s financial position, unless you can establish that’s it’s been recently disconnected as a result of a failure to pay the bill! It also has to be questionable that a rating system being used for pension purposes seems to totally ignore the financial implications of a DB pension scheme on the company which could mean that on face value a company may look like it has significant shareholder funds, but these are dwarfed by their pension liability, could be showing a very strong and therefore misleading D&B rating. It’s well worth checking your position as you could well be parting with more money in PPF levy contributions than is actually required. You have been warned!! For more information on mitigating PPF levy payments see Corporate Advice.